Real Estate Operations in the Coronavirus Era

Now is the time for property owners and landlords to begin enacting existing emergency management and business continuity plans and developing new strategies to address this serious public health event. Given that our understanding of COVID-19 and the governmental response are ever-changing, property owners and landlords should gather updated information and assess risk on an ongoing basis to make sure that business plans adequately address the threat and that measures to protect tenants and staff are enacted quickly and efficiently.

To that end, as we work to contain and mitigate the COVID-19 outbreak, here are key considerations for property owners and landlords:

1. Stay Informed: Guidance from federal and state public health officials will certainly change as more is learned about the virus. Accordingly, property owners and landlords, particularly building security and life safety managers, should be regularly monitoring websites like the Center for Disease Control’s (CDC) COVID-19 Summary Page for the latest best practices guidance from public health experts.

2. Assess Your Risk: To understand the best ways to respond, you need to understand your risk.

To do this, first evaluate the range of risks to your property, tenants, and staff stemming from the COVID-19 outbreak. We know that there a risk that a tenant becomes sick and transmits the virus to others in the building. But, are there other risks to consider as well? For example, if an outbreak occurs, is there a risk that your staff will not be able to perform critical security and life safety obligations? Is there a possibility that key contractors or vendors will not be able to perform their duties?

After you identify the potential risks, consider the consequences of each individual risk. For example, if one tenant becomes ill, the consequence is that many people in the building could be exposed and become ill as well. Only a small number of individuals could be exposed or the entire building.

Then, rank each risk based on (1) how likely the risk is to occur and (2) how serious the consequences of that risk will be. This will help you focus on the most important issues related to the spread of COVID-19 and prioritize resources and attention where they are needed most. You will also be able to see whether your existing emergency and business continuity plans adequately address the risks associated with COVID-19.

3. Prepare to Implement Response Plans: In situations where your company already maintains emergency response and business continuity plans that address public health incidents and pandemics, you should work to enact these plans. Using these templates can provide a solid foundation for a reasonable response program.

Based on the results of your risk assessment, however, you may find that your existing plans need to be expanded to address this particular public health threat. In this case, use guidance from public health officials, industry resources, and counsel to make appropriate changes.

Begin circulating existing or modified plans with key staff and tenant contacts. Consider organizing a teleconference to walk through the plan and apply it to a COVID-19 scenario. Ensure that all stakeholders understand their roles and whom to contact with questions or concerns.

4. Maintain Clear and Frequent Communication with Tenants: As the virus spreads, the likelihood that a tenant or staff member at your building tests positive grows. Consider implementing systems and processes to (1) ensure that you are notified if a tenant or staff member is diagnosed with COVID-19 and (2) provide appropriate notice to others affiliated with the property.

Your obligation to notify tenants if another tenant or staff member is diagnosed with COVID-19 will vary in accordance with individual lease terms, emerging public health mandates, and an ever-evolving industry standard. Be sure to review lease agreements for provisions that may obligate you to notify tenants about security or safety risks present on the property and stay alert for any governmental recommendations or mandates that could apply to you.

At this time, there is no official requirement that property owners or landlords notify building tenants about COVID-19 risks. However, please be aware of what your peer owners and landlords are doing. If a significant number of other owners/landlords in your geographic region are notifying tenants as a matter of course, then you may want to do so as well in order to avoid later claims that an emerging standard of care was not met.

5. Confer with Building Vendors: Property owners and landlords should stay in constant contact with vendors who provide building services, including maintenance, sanitation, and security. Ask vendor companies about their disease management measures and their plans and ability to provide services in the event of personnel shortages.

6. Keep Common Areas Clean: As with any biological or chemical contaminant, it is important that common areas under the control of the property owner or landlord be cleaned on a regular basis. Currently, the CDC recommends cleaning and disinfecting frequently touched surfaces daily. You should also stay alert for additional guidance from public health officials in this regard.

7. Identify and Implement Employee Safety Measures: Consider measures to protect the safety of your employees. These measures will differ based on the responsibilities of various employees and your day-to-day business operations.

The CDC recommends that all Americans avoid close contact with others to stop the spread of the virus. You may have groups of employees who are able to work from home. Assess what preparation you need to put in place to make sure employees can access corporate resources when they are away from the office. Provide guidance on accessing your network and maintaining communication.

For employees who cannot work remotely, other protective measures may be useful. Remind employees about CDC guidance to clean their hands regularly and avoid close contact with anyone who is sick. If employees are required to come into physical contact with others as part of their duties (e.g., security personnel performing screenings), consider investing in personal protective equipment like latex gloves. Also consider providing employees with updated guidance on interacting with tenants and members of the public. For example, consider whether employees should stop shaking hands with others and instead opt for non-contact forms of greeting.

The CDC recommends that anyone who is sick should stay home from work. Develop a staffing and backup plan to cover key building functions while employees recuperate.

8. Adhere to Privacy Requirements: If you decide to make a building wide notification that a tenant(s) has tested positive for the COVID-19 virus, be aware of applicable privacy laws and regulations. Typically, privacy rules will not apply if your notification does not include the infected individual’s name or other identifying characteristics, but it is important to confirm that a notice does not trigger any privacy obligations before it is transmitted.

9. Cybersecurity Considerations: Confirm the cybersecurity readiness of your corporate network and building systems. Your corporate network is likely to see increased stress if utilized by tenants and employees during a heavy period of telecommuting. Relatedly, cybercriminals may use the COVID-19 outbreak as a cover to launch attacks that could cripple building information technology systems. Stay alert to phishing and other social engineering schemes.

10. Review Insurance and Leases Language Regarding Liability Management: Relevant language in property policies and leases should be reviewed to determine the distribution of preparedness, response, and remediation costs between landlord and tenants. Particular attention should be paid to distribution of costs for additional cleaning costs that could be incurred to reduce the possibility of virus transmission in both common areas and tenant spaces. Additionally, remember that response and remediation costs are not always covered by insurance policies, and so policy language should be carefully examined to determine what costs, if any, are reimbursable.

Please direct any questions to Brian Finch, Rachel Horsch, Amanda Halter or Aimee Ghosh.

Pillsbury’s experienced crisis management professionals are closely monitoring the global threat of COVID-19, drawing on the firm's capabilities in supply chain management, insurance law, cybersecurity, employment law, corporate law and other areas to provide critical guidance to clients in an urgent and quickly evolving situation. For more thought leadership on this rapidly developing topic, please visit our COVID-19 resources page.